The use of Common Stock in Venture Capital Transactions

When the supply of venture capital for a company, a company can either raise debt capital, equity or a combination of both. Borrowing money is borrowed, the company at an agreed interest rate for a specified period. Conversely, equity capital is money invested by owners (shareholders) for use in the business which need not be repaid. Combinations are convertible securities, the debt into shares that can be implemented at some point in the future can be.

Thesimplest form of equity is common stock. Common shares, has followed so many different factors:

- Common Stock is not convertible into another type of security

- Each share carries one vote

- Dividends are paid out indefinitely, but can only if declared by the Board

- In liquidation, the holders of common stock will be the last priority to distribute the assets

In venture capital transactions may be two types of shares to be issued. The first is Class A common stock, preferred stock, as of no special voting rights which some statutes marked preference shares before, "." A second type of common shares of junior common stock. While this type of bearing is not used very frequently, it allows businesses to accept shares received in the hands of key employees at minimal tax cost.

Determine what type of capital increase and how the financing structure of the transaction is of crucial importance for the growing> Ventures. As such, it is crucial to understand the key terms and consult the appropriate legal and business consultant for embarkation on the corporate actions process.

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